Islamic Banking Tools

Since its inception QIB has successfully applied various Islamic investment methods which have been approved by the Islamic jurisprudence and are being practiced by other Islamic banks.

The most important Islamic investment techniques practiced by the Bank are as follows:

Sukuk/Securitization

The Bank provides structuring, arranging, and placement services, as well as advisory services, for companies seeking financing through Sukuk issuance, and sees great opportunities and potential for Islamic finance and Islamic financial markets in this area, whereby new issues are distributed to investors in the primary market, and existing securities are traded in the secondary market.

The capital market is the market where companies can raise long-term financing. Nowadays, Sukuk are being looked at as an Islamic equivalent of bonds, hence Sukuk are securities that comply with the Islamic law and its investment principles and provide access for both Islamic investors and companies seeking Shari'a-compliant financing to the capital market.

Sukuk basically relies on the concept of asset monetization, and can be issued on existing as well as specific assets that may become available at a future date; the concept of Sukuk can in some cases also be viewed as Islamic securitization which is very similar to conventional asset-backed securitization whereby a corporate entity moves its assets to an ostensibly bankruptcy-remote vehicle that acquires the assets with the proceeds of issuance of securities.

Musawama Sale

This transaction is executed when a customer approaches the Bank for assistance in purchasing a particular commodity. In such circumstances, the Bank buys the goods from a third party (supplier) at a price agreed between the Bank and the supplier without interference from the customer.

The Bank will then offer the goods to the customer at a price including profit. The customer then has the option to accept the goods or reject it within a fixed period of time. If the customer accepts the goods the Bank will sell the goods to the customer and he/she will then pay the sale price in installments to the Bank over an agreed period of time. A Musawama sale transaction is usually confined to goods purchased from the local market.

Murabaha Sale

The Bank provides this service to its clients who need to acquire goods from abroad through letters of credit.

The customer approaches the Bank for assistance in importing certain goods and provides the Bank with the specifications of the goods in terms of description, quantity, price etc.

The Bank then imports the goods on its own account in order to sell to the client at a price which covers the cost and an agreed profit margin. The customer pays the price to QIB in installments over an agreed period of time.

Istisnaa

This is a form of contractual relationship whereby the client agrees with the Bank to execute a certain project bearing all the costs of raw materials and salaries. The Bank then delivers the accomplished project price and commissions one or more construction companies to execute the project.

Mudaraba Investment

Mudaraba is a mode of financing whereby the Bank would provide the funds for a certain business project or transaction and the customer would provide the professional expertise and know-how to run the business or execute the transaction. Thus, a joint venture is formed between the Bank and the client and any profits are shared in a predetermined ratio.

Through this mode the Bank has executed and continues to execute various projects on a regular basis.

Musharaka Investment

Musharaka Investment is considered to be the main factor that differentiates an Islamic bank from a conventional commercial bank. According to this technique the Bank provides a share of the finance required by a customer for a business project or for the purchase of specific merchandise and becomes a partner in the business or the transaction. The resultant profits or losses are shared by the Bank and the customer at a Shari'a-compliant ratio agreed upon in advance.

The Bank has financed many businesses and projects in Qatar through Musharaka.

Ijarah

Under this method the Bank purchases an asset like a building, machinery or equipment and leases it to others. Before an Ijarah is undertaken, a feasibility study is conducted to ascertain its profitability and compliance with Shari'a.